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Thursday, January 20, 2011

PA "state-building" is a myth

More than 60% of the Palestinian Authority's Gross National Product comes from the United States, European Union, United Nations, World Bank and others countries, according to a study conducted by economic analyst Eyal Ofer in cooperation with President of Financial Immunities consulting firm Adam Roiter.

According to the study's findings, during 2009 and 2010 the PA's reliance on donations increased – with a 20% growth in donations, totaling some $3.96 per year.

In real values, the scope of donations more than doubled within a period of four years.

The research, similarly to OECD reports, points to the PA's steadily increasing dependence on donation funds. In fact, the Palestinian people receive the largest amount of donations worldwide.

For every Palestinian citizen, the PA receives an average of $1,000 per annum, which amounts to an average of ILS 2,000 (about $560) per family, per month. The data reinforces the claim that there is no Palestinian economy, and that in reality is almost exclusively supported by the donation industry.

Yes, an economy can be built from donations – if these are allocated for development, production and infrastructure, but this is not the case.

"The donations toward the entrenchment of government institutions instead of the development of infrastructure, industry, human capital etc'," explained Roiter. "What we have here is a schnorrer country, without which it does not exist," he added.

Ofer and Roiter noted that since 2000 – when the rate of donations reflected 10.47% of total GNP – there has been a steady increase in the scope of foreign donations. The most significant boost began in 2007, immediately after Hamas gained control of the Gaza Strip, and following the PA's claim that it needed more funds to establish its regime.

Palestinian Prime Minister Salam Fayyad's links with the International Monetary Fund, as well as his "Western" rhetoric vis-à-vis transparency, the building of government institutions and preventing market monopolies have helped him with the task of fundraising.

However, according to the study, the facts on the ground indicate that the governmental apparatus and international aid organizations impede the growth of the business sector, while donations are used to preserve the ruling party rather than build a separate economy that is not dependent on foreign donations.

The study points to the absence of an industrial sector in the Palestinian Authority. "Employers lack the ability or the will to go into industry or development, because they cannot compete with the salaries of governmental organs and that of the aid workers on the ground," said Ofer, adding, "In reality, their economy is solely based on the trade of services."

Even grants that are specifically designated for "projects" throughout the Palestinian Authority are only partially used for their original purpose, claimed Ofer.

I have a copy of the study, written in Hebrew and not yet available publicly. It breaks down the sources of the nearly $4 billion that the PA gets annually, this besides the money UNRWA gets.

The study also partially debunks the myth of the PA being ethical in its use of donor money. The head of the PA banking system is the son of Abu Jihad. While the World Bank claims that the PA is adhering to money laundering laws, it "forgot" to delve into money laundering for terrorism. In fact, the PA doesn't have the word "terror" in its regulations (and only uses that word when referring to Israel.)

For example, in 2007 the PA sent $3 million to Hamas bank accounts in Gaza, and attributed it to a "computer error" - but there has been no investigation or trial in the matter.

The study also notes what I have mentioned a number of times - that some 60% of the PA budget goes to Gaza, and it is Western trust in Fayyad that allows this to happen without proper oversight.

The study says that the PA is happy with the status quo. Fayyad's power is increasing because the inflow of money is dependent on him, and an entire layer of bureaucracy has been created to funnel cash to various targets, which do not involve anything that can possibly make the PA truly independent. Nothing has been done yet to create a Palestinian Arab currency, for example, which would be a pre-requisite for independence. And if the Israeli tax dollars that help prop up the PA would disappear, the PA would not be able to survive.

So Fayyad will continue to make his statements blaming everything on Israel, which does not cost him a dime, and do everything necessary to keep the foreign aid coming.

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